Asia Close Lower on US Budget Impasse Anxiety

CNBC.com With Wires

Friday, 21 Dec 2012 | 4:10 AM ETReuters

SHARES

Asian shares retreated from earlier session highs to close lower on Friday after a Republican proposal to deal with a U.S. fiscal crunch failed to get enough support, deepening the threat of a recession in the world's largest economy.

U.S. House of Representatives Republicans said on Thursday that House Speaker John Boehner's decision to pull the "fiscal cliff" legislation due to lack of votes left uncertain the future of negotiations to avert automatic spending cuts and tax increases in January.

Japan's Nikkeiaverage erased earlier gains and turned lower on Friday after a Republican proposal to avert with a U.S. fiscal crunch failed to get enough support, triggering selling in exporters as the yen strengthened.

Paul Pong, Managing Director, PEGASUS Fund Managers says that H-shares will outperform next year as markets get a clearer direction on the policy front from Beijing.

The CSI300 of the top Shanghai and Shenzhen closed down 0.5 percent on Friday, but rose 0.7 percent on the week to 2,372 points. The Shanghai Composite Index shed 0.7 percent on Friday but inched up 0.1 percent this week.

Hong Kong shares posted their worst day in three weeks and their first weekly loss in five, as investors cut risk at the end of the last full trading week this year after talks stalled on a deal to avert a fiscal crisis in the United States.

The Hang Seng Index closed down 0.7 percent on the day and down 0.4 percent on the week at 22,506.3. The China Enterprises Index of the top Chinese listings in Hong Kong shed 1.1 percent on Friday and 0.7 percent this week.

Low turnover and strength in defensive plays such as Hong Kong utilities further pointed to risk aversion at the end of the last full trading week in 2012. Next week, Hong Kong markets will shut from noon on Monday and resume trading only on Thursday.

Anta Sports jumped 3 percent to HK$6.54 after UBS raised their price target from HK$7.50 to HK$9, expecting Anta to be among the survivors of an ongoing consolidation in Chinese sportswear brands.

Seoul shares ended down on Friday to post their first weekly loss in five weeks after U.S. House Speaker John Boehner abandoned his "fiscal cliff" plan, muddying the outlook for a deal aimed at averting a recession.

Other tech shares also dragged the index down with LG Display easing 3.5 percent and SK Hynix slipping 3.4 percent.

Australian shares slipped 0.2 percent on Friday pulled down by shares in mining and gold as news of a Republican collapse in the U.S. "fiscal cliff" wrangle weighed on investor sentiment leading up to the Christmas break.

The benchmark S&P/ASX 200index was 10.5 points lower at 4,623.6, still near the highs reached earlier this week.